The Non-Bank Financial Intermediaries and Economic Growth in Tanzania: An Empirical Analysis 1967 €“2011
Abstract
This study examines the impact of development of Non-Bank Financial Intermediaries
(NBFIs) on economic growth in Tanzania using time series data for the period 1967 €“ 2011. It employs Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration and error correction method to investigate the existence of long-run and short-run dynamics in the relationship between NBFIs and economic growth in Tanzania. Stationarity property of the series was tested by using Phillips-Perron (PP) and Zivot-Andrews methods. Results from the study confirmed the existence of a stable long-run relationship between economic growth, the NBFIs and other determinants €” investment, inflation, interest rate, and trade openness. Notable, however, the study found that the development of NBFIs, as measured by lending to the government, exerted a significant positive effect on economic growth in the short-run but not in the long-run. CUSUM and CUSUMQ test results revealed a lack of evidence of any significant structural instability among variables used in the study. The results suggest that it is important to have appropriate policies aimed at developing the non-banks financial sector to foster economic growth over the long-run period.
Key words: non-banks, economic growth, cointegration, error correction model, ARDL method, Tanzania.
JEL Classification: E2, E4, E5.
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